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Budget Speech by the Financial Secretary (2)

Developing the Economy and Increasing Employment

14. As the world's economic balance shifts to Asia, Hong Kong should ride the wave of the new order by capitalising on our unique advantages and exploring new business opportunities to take Hong Kong's economy to new heights.

15. During the Budget consultation, many people mentioned the role of the Government in the development of a market economy, and the general consensus was that the free and open mode of economic development which had been the key to Hong Kong's success should be maintained.  We maintain a simple and low tax regime while prudently controlling government expenditure to leave most of the wealth to the market and the public.  Entrepreneurs, investors and members of the public are free to make their own decisions on business, investment and employment issues, making it possible to use the limited resources more effectively.

16. This does not mean that the Government is merely reactive.  In fact, the Government has been playing a pivotal role in the market economy, especially in times of market failure when it takes steps to restore the market balance to ensure that the community can share the fruits of economic growth.  The Government acts as provider of public service, mediator in the allocation of public resources as well as negotiator in discussions with other governments.  As I see it, government participation and market operation are complementary concepts.  What matters is how to make the two work together, and how to strike a balance between social costs and benefits.

17. The current-term Government will continue to count on market forces and act in a rational and pragmatic manner in collaborating with the market to grasp development opportunities and create a better business environment to foster robust economic growth underpinned by our established strengths and foundations.  The ultimate objective of economic policies is not about chasing after statistics.  It is about expanding the scale of Hong Kong's economy, promoting the holistic development of our society and creating more business and job opportunities so that our people can realise their aspirations and improve their living standards.  At the same time, the Government will distribute social resources effectively through appropriate policies and measures so that the needy can be provided with appropriate relief and become self-reliant.

18. To promote future economic development, we must work on two areas.  First, we must foster our economic integration with the Mainland to take advantage of its market development.  We know the huge Mainland market well.  The Government will make good use of all Government-to-Government (G2G) platforms to help Hong Kong enterprises expand their Mainland business, channel overseas capital to the Mainland market, and support Mainland enterprises in "going global".  More importantly, we must at the same time preserve Hong Kong's characteristics as an international city.  We must recognise our biggest advantages - a sound legal system, a level-playing field and an excellent business environment.  We treasure our core values of individual freedoms, the rule of law and a clean government, which align us with the international system.  We shall support our enterprises by strengthening opportunities in traditional markets, exploring new areas of growth and opening up more new markets.

19. The Economic Development Commission established by the Chief Executive will provide a new platform for the Government to work with the market in the promotion of economic development.  It will develop ideas, advise on strategies and policies, examine the structure of different industries, and explore measures for their development.

20. Second, we must expand and strengthen our pillar industries to maintain our competitiveness.  We must also support the development of new industries, build a more diversified and solid economic base, and provide more career choices for our younger generation to realise their potential.

21. Traditional pillar industries have been the major driving forces behind Hong Kong's economic development.  They have clear advantages internationally and are highly competitive.  Currently, the four pillar industries - trading and logistics, tourism, financial services and business and professional services employ 1.7 million people, or 48 per cent of the total labour force.  These pillar industries contribute to 59 per cent of our GDP.  With a large economic base, they serve as a powerful driver for related sectors and the job market as well.  I shall now introduce measures to further promote these industries.

Consolidating Trading and Logistics Industry

22. The trading and logistics industry consolidates different economic and production activities, and creates numerous jobs with different requirements for academic qualifications, skills and experience.  The industry currently employs 770 000 workers and contributes to one quarter of GDP, the highest among the four pillar industries.

Modern Logistics Services

23. Due to changes in market demand, the industry is moving towards the provision of high value-added logistics services.  Hong Kong is developing into a regional distribution centre for high-value goods, which differs from its conventional role in transporting components, semi-finished products and finished products.

24. With an efficient intermodal transport network, the status of a free port and a sound legal system to protect intellectual property, Hong Kong has an edge in handling and distributing high-value goods to markets in the region.  Our responsive and efficient logistics enterprises can provide high value-added and "tailor-made" services to cater for the different needs of customers in respect of supply chain management.  Our logistics industry has potential to further expand its regional services, thereby strengthening Hong Kong's position as a logistics hub.

25. We need to build dedicated facilities to help the development of high value-added logistics services which will help shorten operating time and reduce logistics and inventory costs.  We have reserved a logistics site with an area of about two hectares at Tsing Yi which will be put on the market in the first half of this year.  We also plan to designate about ten hectares of land at Tuen Mun West for the development of logistics facilities.  This will facilitate clustering of companies involved in various operations and services for the industry.  Tuen Mun West is an ideal site for this.  Upon completion of the Tuen Mun-Chek Lap Kok Link in 2018, it will only take ten minutes to travel from Tuen Mun West to the Airport.  We shall conduct a feasibility study on the proposed development and shall release the logistics sites in Tuen Mun West in phases.

26. Upon completion of the logistics facilities at Tsing Yi and Tuen Mun West, more than 300 000 square metres of floor area and 7 500 new jobs in various trades will be provided, yielding over $3 billion worth of economic benefits annually.

Facilitating the Flow of Goods

27. After the 911 incident in the US, various countries enhanced their air cargo security requirements.  It is imperative that our freight and logistics operators make early moves to gain greater international recognition in cargo safety and management.  This will facilitate the customs clearance of our export overseas, and maintain Hong Kong's competitive advantage as a logistics hub.

28. The Customs and Excise Department (C&ED) launched the Hong Kong Authorised Economic Operator Programme last April.  The Programme accredits local companies with sound internal safety and management systems in accordance with international criteria, giving their consignments customs facilitation, including prioritised clearance and simpler inspection procedures.  The C&ED has liaised with other customs authorities to seek mutual recognition of similar programmes, so that locally-accredited companies can enjoy corresponding preferential treatment outside Hong Kong.  The C&ED will allocate additional resources to boost companies' participation in the Programme and promote mutual recognition.

Transport Infrastructure

29. To enhance the external connectivity of our transport network, we shall continue to push ahead with the planning and implementation of, sea, land and air transport infrastructure projects.

30. Regarding the proposal of constructing Container Terminal 10 at Southwest Tsing Yi, we are conducting a study to examine the technical feasibility and assess the environmental impact of the proposal.  The Study on the Strategic Development Plan for Hong Kong Port 2030 is also under way to update port cargo growth forecasts and explore how to make better use of the existing port facilities to support future development.  Both studies are scheduled for completion in the first half of this year.  In deciding on the need to construct Container Terminal 10, we shall take into account, among other things, the studies' results and the economic situation and the views of stakeholders.

31. On land transport, the local projects of the Hong Kong-Zhuhai-Macao Bridge are scheduled for completion in 2016 to tie in with the opening of the main bridge.  This bridge connection will become part of a strategic road network linking Hong Kong, Zhuhai, Macao and Shenzhen.  The Western Pearl River Delta (PRD) will fall within a three-hour commute from Hong Kong.  The airport and container ports in Hong Kong can be used for transporting goods from the Western PRD, Guangxi Province and nearby countries such as Vietnam and Thailand.  This will strengthen Hong Kong's position as a trade, logistics and aviation hub.

32. On air transport, the Airport Authority Hong Kong (AA) has commenced an environmental impact assessment and other planning for the three-runway system, which is expected to cope with air traffic demand up to at least 2030.  The Government will decide on the development of the three-runway system when all relevant information is available.

Emerging Markets

33. Supporting local enterprises to tap new markets, facilitating trade flows and promoting economic development are important roles of the Government.  The Government's work in this area is of particular importance to the development of the modern trading and logistics industry.  With our country's strong support, Hong Kong has submitted to the Association of Southeast Asian Nations (ASEAN) a request to join the China-ASEAN Free Trade Area to assist our traders to further tap into the emerging Southeast Asian market.  ASEAN member states are currently considering our proposed accession, and conducting internal consultations and studies.  We shall continue our lobbying work, and collaborate with the Hong Kong Trade Development Council (HKTDC) and local trade associations to organise more business missions and discussion forums to enhance interaction between Hong Kong and ASEAN businesses.

34. Our efforts to tap emerging markets have started to deliver results.  Over the past five years, with more frequent communication through G2G platforms, the trade in goods between Hong Kong and the BRICS countries grew substantially by over 40 per cent in value.  Amongst the BRICS countries, our bilateral trade with India registered cumulative growth of over 90 per cent while that with Russia even increased by 1.5 times.  To further diversify Hong Kong's export network, we shall continue our efforts to promote Hong Kong in and strengthen trade links with emerging markets.

Promoting Tourism Industry

35. Tourism is another mainstay of our economy, employing some 230 000 people and accounting for 4.5 per cent of GDP.  In 2012, there were over 48 million visitors to Hong Kong, an increase of 16 per cent over 2011.  Despite the gloomy global economic outlook, total spending associated with inbound tourism increased 16.5 per cent to exceed $300 billion.

36. Buoyant tourism will undoubtedly put pressure on our control points, hotels, tourist attractions and shopping centres.  To sustain the healthy development of the tourism industry, we need to devote more efforts to enhancing tourism infrastructure, hotel supply, market promotion, service support, etc.

37. Last year, I announced that the Government would look into the further development of Ocean Park and Hong Kong Disneyland.  Ocean Park is the winner of the prestigious 2012 Applause Award, the first-ever Asian attraction to be recognised as the best theme park in the world.  To further enhance its facilities, Ocean Park will build an all-weather Water World at Tai Shue Wan.  The Government will offer a $2.3 billion loan to Ocean Park to spur early commencement of the project.  We shall submit a funding proposal to the Finance Committee in the next few months.  In the coming few years, Hong Kong Disneyland will launch a new night-time parade and put in place a themed area featuring "Marvel heroes", the first of its kind in the world.  These new projects will be funded by the Disneyland's operating surplus.  Meanwhile, the two theme parks are actively pursuing new hotel projects to provide better complementary services for tourists.

38. The terminal building and the first berth of the Kai Tak Cruise Terminal will be commissioned in the middle of this year.  Preparations are in full swing for the Terminal to receive its first liner, Mariner of the Seas with a capacity of 3 840 passengers, on 12 June.  Meanwhile, we are actively working with the Hong Kong Tourism Board to promote cruise tourism, and collaborate with the travel trade and neighbouring ports on itinerary development and regional co-operation.  We aim to exploit the potential of cruise tourism in Asia Pacific and attract more high-spending cruise trip visitors to Hong Kong, so as to reinforce our position as a regional cruise hub.

39. Increasing the supply of hotels will help enhance receiving capacity and service quality.  Currently, there are over 210 hotels in Hong Kong, providing more than 67 000 rooms.  The Government has been working to make available more hotel rooms through various measures, including providing "hotel only" sites.  As at end-2012, 13 applications for redevelopment or wholesale conversion of industrial buildings into hotels were approved by the Lands Department.  It is estimated that some 10 000 new hotel rooms will be provided this year and next year.

40. Following my proposal to extend the operation of the Mega Events Fund last year, we sponsored several major international events, including the Hong Kong Dragon Boat Carnival and the Hong Kong Open Championship (golf tournament).  We shall continue to sponsor more international mega events to be held in Hong Kong through the Fund, and use the existing mechanism to subsidise mega events hosted by local non-profit-making organisations.  In recent years, our neighbouring cities have organised mega events, such as the Formula 1 Races and overseas NBA games.  We shall take the initiative to seek to host more mega events.

41. In the coming few years, large-scale tourist facilities will come on stream, and there will be major events funded by the Mega Events Fund or hosted in other forms.  I believe that the tourism industry will continue to flourish and spur growth in other service sectors, including food and beverage, retail and transport, creating many employment opportunities.

(To be continued)

Ends/Wednesday, February 27, 2013
Issued at HKT 11:24


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